Business Use of Vehicles&Mileage Reimbursement Update
From insurance to fuel, there are expenses to driving and maintaining a vehicle. If you’re using your vehicle for business purposes, those expenses may be deductible. At Brannen CPA Services, we’re here to provide relevant insights to help our clients and we often get questions about the business use of vehicles. Perhaps you use your car exclusively for your business, or maybe you only need to use your car occasionally for work. Knowing what tax deductions you can take for this use depends on your specific situation. In this article, we outline what to know about using your car for business.
Generally, there are two ways the IRS allows you to calculate the amount of your deductible car expense:
Standard Mileage Rate Method
Actual Expense Method
You may qualify for one or both methods of deduction, it depends on your situation and how often you use your vehicle for business purposes.
Standard Mileage Rate Method
With this method, you can deduct the amount of miles you use your vehicle for business purposes. This does not include your commute to and from your place of work. Here are some examples of vehicle use that would qualify:
Driving to meet clients, your accountant, or attorney.
Driving to run work-related errands, such as to the bank or office supply store
Driving from your main office to other office locations
The IRS has issued a standard mileage rate of 67 cents per mile for 2024 for the use of a car for business purposes. This is up 1.5 cents from 2023. You must own or lease your vehicle and this rate applies to both electric and standard vehicles. You also must have evidence of your business mileage, so find a reliable way to track your miles. The IRS defines other criteria for using this method as well, such as not owning and operating more than five vehicles at the same time. More detailed information can be found on the IRS’s website.
Actual Expense Method
To use this method, you must determine the exact amount of what it costs to operate your vehicle for the portion you use it for business. You would need to track your costs. Examples include:
Fuel
Repairs
Insurance
Tires
Registration Fees
Tolls
This can get complicated if your vehicle is used for both personal and business purposes, as you can only deduct a percentage of the total amount you spend on your car. Since you can be eligible for both the standard mileage rate method or the actual expense method, it is important to figure out which will yield you a larger return.
There are other possible avenues for small businesses to receive deductions when a vehicle is purchased for the business, such as with a Section 179 deduction. If you are a business owner and are hoping to write off a vehicle purchase as a business expense, let us know. We can help you navigate the forms and record-keeping required so you can focus on running your business!
At Brannen CPA Services, we love providing sensible solutions and superior service so our clients thrive! If you have questions about using your vehicle for business purposes or need help determining which method to use when calculating your deduction, please give us a call!